What direction is California going in this year in 2023-2024? LTR or STR?

[Zachary Wurtz]

Hey guys! I'm located in the Oceanside, CA area and I've been looking for potential properties I can either LTR or convert to STR all the way from the Kern County down to San Diego county. I'm new to the game and I would like to do something local so I can really watch every step in process for my first couple properties before I invest out of state so I feel more confident; however, with this insane market, what are investment properties leaning to as far as LTR or STR in Southern CA? The reason I ask is because I will be using lenders for down payment and renovations so would the property increase in value the same as it would 4 years ago to make that money back when you cash out refinance?

If anyone is in the local area, I would love to meet up to find like minded people with the same goal! Thanks!

[Dan H.]

We have done quite a few BRRRR but have not purchased since Dec 2021. The is not the buy, rehab and refinance. That has always had its challenges but has not changed significantly. The issue is that after the refinance, the rent typically produces negative cash flow with proper/conservative under writing when renting as LTR.

Post Covid travel craze, STRs in many locations are not performing better than LTR when using PM. You need to understand everything about the STR market in that location before proceeding This includes STR laws, STR sentiment, saturation/occupancy, cleaners (cost, reliability, etc), PM options, etc).

In addition CA is STR unfriendly. The city of San Diego this year introduced STR quotas. In addition, the state proposed a 15% STR tax penalty disguised as an affordable housing bill. Thankfully it did not get passed by the assembly.

In summary do your due diligence.  I fear the days of purchasing any property in the Ca coastal cities and doing great is past.  

Good luck